-
Desired aggregate expenditure (AE)
- -
- The sum of desired or planned spending on
- domestic output by households, firms, governments, and foreigners.
-
Autonomous expenditure
- -
- Elements of expenditure that do not change
- systemically with national income
-
Induced expenditure
- -
- Any component of expenditure that is
- systematically related to national income
-
Closed economy
- -
- An economy that has no foreign trade in goods,
- services, or assets.
-
Saving
- All
- disposable income that is not spent on consumption.
-
Consumption function
- -
- The relationship between desired consumption
- expenditure and all the variables that determine it; in the simplest case, the
- relationship between desired consumption expenditure and disposable income.
-
Average propensity to consume (APC)
- -
- Desired consumption divided by the level of
- disposable income.
-
Marginal propensity to consume (MPC)
- -
- The change in desired consumption divided by the
- change in disposable income that brought it about.
-
Average propensity to save (APS)
- -
- Desired saving divided by disposable income.
-
Marginal propensity to save (MPS)
- -
- The change in desired saving divided by the
- change in disposable income that brought it about.
-
Aggregate expenditure (AE) function
- -
- The function that relates desired aggregate
- expenditure to actual income.
-
Marginal propensity to spend
- -
- The change in desired aggregate expenditure on
- domestic output divided by the change in national income that brought it about.
-
Simple multiplier
- -
- The ratio of the change in equilibrium national
- income to the change in autonomous expenditure that brought it about,
- calculated for a constant price level.
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